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  • Context and Success in Entrepreneurial Decision Making; An

    Empirical Validation

    Erik van de Pieterman

    University of Twente

    Abstract

    Effectuation theory claims to have superior predictive power over traditional ‘causal’ methods for understanding entrepreneurial decision making under conditions of uncertainty.

    While gaining a lot of support initially, with some scholars talking about a possible paradigm

    shift, recently there has been a call for more a more nuanced view. This thesis aims to

    contribute to this debate by quantitatively testing the relationship of several context variables

    with entrepreneurial decision making. Furthermore an attempt is made to construct a

    multidimensional construct to measure entrepreneurial success in a way that is aligned with

    effectual thinking. Data was collected from 87 expert and novice entrepreneurs by means of a

    survey, and an additional existing dataset containing 185 respondents was included bringing

    the total dataset to 272. Findings include evidence for the impact of cognition on decision

    making, and a moderating effect of culture on that relationship. Interestingly, no direct or

    moderating effect of expertise is found, even though this is a core argument for the

    proponents of effectuation theory. Furthermore effectuation is found to be moderately

    negatively correlated with causation, indicating that a dichotomous distinction between the

    two styles is not productive. It is concluded that entrepreneurial decision making is a complex

    process, dependent on subtle differences in contextual factors, but that effectuation might be

    a fruitful avenue to challenge existing and traditional models of entrepreneurship.

    Keywords: Effectuation, causation, expertise, culture, cognition, entrepreneurial succes, decision making.

    Supervisory committee:

    First supervisor: dr. M.R. Stienstra

    Second supervisor: dr. M.L. Ehrenhard

    Ad interim supervisor: dr. R.P.A Loohuis

    Faculty of Behavioural Management and Social Sciences

    University of Twente

    Date: 25-07-2018

  • Contents

    Chapter 1. Introduction .............................................................................................................. 2

    1.1 The origins of the field ..................................................................................................... 2

    1.2 The need for context ......................................................................................................... 3

    1.3 Planned versus emerging theories .................................................................................... 3

    1.4 Purpose and outline of the thesis ...................................................................................... 5

    1.4 Scientific & societal relevance ......................................................................................... 6

    Chapter 2. Theoretical framework ............................................................................................. 7

    2.1 Introduction ...................................................................................................................... 7

    2.2 Effectuation theory ........................................................................................................... 7

    2.3 On context ...................................................................................................................... 10

    2.4 Cognition - Entrepreneurship as a mode of thinking ..................................................... 12

    2.5 Culture - Local contingencies influencing behavioral preferences ................................ 15

    2.6 Expertise - What makes an expert? ................................................................................ 17

    2.7 Entrepreneurial outcomes - A holistic notion ................................................................ 19

    Chapter 3. Model & Hypotheses .............................................................................................. 24

    Chapter 4. Methodology .......................................................................................................... 26

    4.1 Introduction .................................................................................................................... 26

    4.2 Research Design ............................................................................................................. 26

    4.3 Sample ............................................................................................................................ 27

    4.4 Operationalization & instruments .................................................................................. 28

    4.5 Procedures ...................................................................................................................... 33

    4.6 Validity ........................................................................................................................... 33

    4.7 Ethical considerations .................................................................................................... 34

    4.8 Conclusion on methods .................................................................................................. 35

    Chapter 5. Results .................................................................................................................... 36

    Chapter 6. Conclusion .............................................................................................................. 38

    6.1 Interpretation of the results ............................................................................................ 38

    6.2 Conclusion ...................................................................................................................... 40

    Chapter 7. Discussion .............................................................................................................. 42

    8. Bibliography ........................................................................................................................ 42

    9. Appendix .............................................................................................................................. 44

  • Chapter 1. Introduction

    “The answers you get depend on the questions you ask.” ~Thomas S. Kuhn

    1.1 The origins of the fi eld

    Entrepreneurship is probably as old as mankind itself (Tatyana & Aleksandra, 2013). The

    first known trading occurred already around the year 17,000 BC. Small communities of

    hunters and gatherers would venture out to other tribes in search of a place where they could

    exchange their surplus goods in return for items that they themselves did not have. The

    agricultural revolution, some 12,000 years ago, made it possible for people to increasingly

    specialize in their labor. The introduction of debt and currency made the exchange of goods

    significantly easier. The scientific and the subsequent industrial revolution marked the

    beginning global capitalism (Cook, 2004).

    The early twentieth century saw the beginnings of our current conception of the social

    sciences, and the idea that society may be studied in a standardized and objective manner.

    The idea was to apply mathematics and the search for universal laws from the natural

    sciences to the realm of society. How wonderful would it be to be able to predict and control

    parts of society in the same way as we are able to with nature. As such our modern social

    sciences were born. In the field of economics and business, Schumpeter (1934) pioneered in

    systematically reflecting on the nature of entrepreneurship. He defined entrepreneurship not

    only in terms of economic gains, but also as a drive of innovation and technological change.

    Entrepreneurs not only contribute to a nation’s wealth, but are also capable of being the mediators between newly developed scientific knowledge and its application in our society.

    So entrepreneurship as an academic discipline was born. As with many social sciences which

    are based on human action, a clear definition is difficult. Most people know intuitively what

    is meant by entrepreneurship, but a clear definition of the concept in academia has been

    subject to a lot of discussion (Carton et al., 1998). Contributing to this ambiguity is the fact

    that the subject can be approached from many different angles and disciplines, such as

    sociology, economics, psychology, and management (Hebert & Link, 2009). It can be

    described as a multifaceted phenomenon (Low & MacMillan, 1988). Some even argue that

    we should not try to reach agreement on an exact definition of entrepreneurship (Stearns &

    Hills, 1996). Such is the fate of applying the scientific method to a social phenomenon as

    elusive as entrepreneurship.

    However, good attempts to formalize and mathematize the field of entrepreneurship were

    undertaken in a quest to predict and control aspects of entrepreneurship. This led for example

    to a search for personality indicators of successful entrepreneurs (Zhao & Seibert, 2006), the

    ability of entrepreneurs to predict the future and control uncertainty (Langlois & Cosgel,

    1993), or a formal des

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